ETF-initely a game changer? SEC clears the path for spot crypto ETFs

The US Securities and Exchange Commission (SEC) voted recently to approve proposed rule changes by three national securities exchanges, enabling them to adopt generic listing standards for new cryptocurrency and other spot commodity ETFs. This means exchanges can now list and trade Commodity-Based Trust Shares that meet these standards without needing to submit individual proposed rule changes to the Commission under Section 19(b) of the Securities Exchange Act. This approval removes the last listing hurdle to a series of new spot ETFs tied to cryptocurrencies ranging from Solana to Dogecoin.

In July, the SEC voted to allow in-kind creation and redemption to facilitate in-kind contributions and distributions in digital assets in connection with the issuance of interests in exchange traded products, similar to other commodity ETFs.

The new standards set out the criteria that asset managers and exchanges, including the NYSE, Nasdaq and Cboe Global Markets, must meet to obtain approval for listing a spot crypto ETF without a lengthy and customised regulatory review. Previously, each spot crypto ETF filing required two separate submissions and was reviewed on a case-by-case basis by the SEC, often taking up to 240 days or more. Under the new process, the timeframe is reduced to a maximum of 75 days.

This move is part of ongoing efforts by the Trump administration to bring crypto assets into the mainstream. SEC Chair Paul Atkins described the approval as way to foster innovation and reduce barriers to digital asset products within America’s trusted capital markets, reflecting the SEC’s initiative to modernise securities and enable America’s financial markets to move on-chain.

Teddy Fusaro, president of Bitwise Asset Management told Reuters:

This is a watershed moment in America’s regulatory approach to digital assets, overturning more than a decade of precedent since the first bitcoin ETF filing in 2013

The generic listing standards offer limited pathways for asset managers to seek spot ETF approval. Commentary suggests that most applications are likely to rely on the provision allowing expedited approvals for crypto ETFs that have had futures contracts regulated by the Commodity Futures Trading Commission in existence for at least six months

Steve Feinour, partner at Stradley Ronon said:

Not every token is going to currently qualify, but (the SEC approval) will open up the floodgates.

This comes as the launch in September of the Dogecoin ETF via the Rex Shares-Osprey Dogecoin (DOJE) fund. While not a spot ETF, DOJE offers futures-based exposure to dogecoin via a Cayman Islands subsidiary. This ETF is structured more like a mutual fund than a commodity trust, which sets it apart from the wave of crypto spot ETFs impacted by the recent SEC approval for commodity-based and asset-based products.

The SEC has shown increasing comfort with crypto ETFs since the introduction of various bitcoin and ether products over the past year. The launch of these products is expected to open the door to more memecoin ETFs, expanding and blurring the lines of traditional finance. Several firms have already filed applications to launch spot DOGE ETFs, which would hold the memecoin itself.

These developments suggest a gradual easing of listing restrictions for compliance-orientated funds and may signal the beginning of a shift towards clearer regulatory frameworks and broader market participation. The ETP vehicle also allows a broader pool of investors, particularly institutions, to gain regulated exposure to crypto-assets via an investment vehicle which is well understood and more readily accommodated within their investment mandates.

By Michael Bacina, Steven Pettigrove and contributors